By Felix Njini
Anglo American's Shift to Copper-Focused Mining
JOHANNESBURG (Reuters) – The speed at which Anglo American (JO:AGLJ) transitions to become a copper-focused miner may dictate its future—whether it survives as an independent entity or is absorbed by a larger rival like BHP Group (NYSE:BHP), which earlier attempted to acquire the company.
BHP abandoned a $49 billion bid for Anglo in May after three rejections. With a six-month waiting period for another approach ending late November, speculation about a new deal is rising.
Anglo successfully convinced investors during BHP's pursuit that it had a more favorable plan for growth by divesting underperforming platinum, diamonds, and coal assets to focus on copper—a vital metal for energy transition.
If Anglo's transformation succeeds, the value derived from its copper assets may bolster its independence, according to a Cape Town fund manager. However, the longer this transformation takes, the more likely investors may consider another bid.
Investors holding shares in both companies believe BHP CEO Mike Henry might renew efforts to acquire the London-listed miner. The timing and rationale for such an approach will likely depend on Anglo's growth against the backdrop of cash-rich competitors.
Anglo CEO Duncan Wanblad is expediting the sale of coking coal mines in Australia and nickel assets in Brazil while planning to spin off platinum mines in South Africa. The company is also contemplating the sale or separate listing of De Beers' diamonds unit.
The coveted copper assets in Latin America make Anglo attractive to rivals seeking greater exposure in the copper market. However, operational issues persist, with a reported 13% decline in copper output in the third quarter, although the company remains on track to hit its production target of 730,000 to 790,000 tons this year.
BHP did not respond to inquiry attempts regarding the situation.
Choosing the Moment
Anglo's shares increased by 4.3% in London on Monday amidst a general rise in mining stocks, but they have lost much of the premium gained during BHP's initial approach.
If Anglo's valuation lags during its restructuring, it presents potential opportunities for BHP. A source from a leading investor in both companies suggested that BHP should allow Anglo to complete most of its promised restructuring by the end of 2025 before making another bid.
Analysts from UBS Group indicated BHP might wait until Anglo spin-off its platinum business by mid-2025 to ease the complexities of a potential deal. They also expect that restructuring will enhance Anglo’s valuation. Without significant changes, another takeover bid is possible.
Christiaan Bothma, an investment analyst at Sanlam Private Wealth, noted it would be sensible for BHP to let Anglo manage its asset separation. However, he cautioned that delaying could lead to an inflated valuation for Anglo or lower iron ore prices, which are critical to BHP's strategy.
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